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Extension of due date for filing of income-tax returns – Much Ado About Nothing!

September 10,2016

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Mr Ameet N. Patel (Partner, Manohar Chowdhry & Associates)

The unthinkable has happened! The CBDT has issued a notification on 9th September in exercise of the powers vested in it under section 119 of the Income-tax Act, 1961 (the Act) extending the due date for filing of returns u/s. 139(1) of the Act from 30th September, 2016 to 17th October, 2016.

This is the first time that an extension of time has been notified by the CBDT without any CA or a body of CAs actually asking for the same. Secondly, it has come well in advance instead of being notified at the last moment. There have been no writs filed by anyone in any court of law seeking a forcible extension of time.

By itself, an extension of this type should not create a controversy. But, many people thrive on creating controversies by reading in between the lines, by reading into the lines and by interpreting and misinterpreting words and punctuations and what not. Therefore, there is a raging debate already going on in various quarters about the applicability of the Notification.

First of all, let us see what the notification states. The relevant part of the Notification (F. No. 225/195/2016-ITA-II) is reproduced below (emphasis supplied):

“in exertcise of the powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the `due date’ for furnishing such returns of Income from 30th September, 2016 to 17th October, 2016, in case of tax payers throughout India, who are liable to furnish their Income-tax Return by the said `due-date’.”

The reason given in the Notification for extending the due date is that the last date for making declarations under the Income Declaration Scheme 2016 is 30th September, 2016 and this date coincides with the last date for filing Income-tax returns for A.Y. 2016-17 in case of certain categories of tax payers and this is likely to cause inconvenience to the tax payers. Therefore, with a view to remove the inconvenience as well as “to facilitate ease of compliance”, the due date has been extended.

We are all aware that the Income Declaration Scheme 2016 is being marketed heavily by the Finance Ministry. Even the Prime Minister referred to it in one of his “Mann ki Baat” aired on the radio. Hundreds of meetings have been convened by various officers of the income-tax department as well as the chairperson of the CBDT with the objective of exhorting tax payers to come clean under this Scheme. The Finance Minister is also doing his bit in this regard.

It is therefore understandable that the government does not want to take chances in this matter and hence the due date for filing of returns has been extended.

But, as mentioned earlier, this extension was totally unexpected and unwanted by most Chartered Accountants. Since there has not been any change in the forms for the tax audits, it was virtually a foregone conclusion that this year, there would be no extension. So, the latest Notification has come as a surprise to most of us.

The real reason for writing this article is to deal with the unnecessary controversy as to the scope of the extension. There is animated discussion in several “Whatsapp” groups as well as in other forums, as to whether the due date for tax audits has been extended or not. Some people are also questioning whether the extension covers only those cases where tax audit was applicable and whether those cases where tax audit is not applicable but, because of some other audit, the due date for filing of returns was 30th September are also covered by the extension.

At the outset, I must confess that on a first reading of the Notification, I too was slightly confused about the scope. However, upon a close reading of section 139(1) and section 44AB, all doubts have been cleared. To my mind, the Notification of the extension is quite clearly drafted. All tax payers for whom the due date was 30th September, 2016 are covered by the Notification and therefore, in all such cases, the last date for filing the return of income for A.Y. 2016-17 would now be 17th October, 2016.

First of all, let us see what section 139(1) says. The Explanation 2 to sub section (1) is reproduced below (emphasis supplied):

Explanation 2.—In this sub-section, "due date" means,—

(a) where the assessee other than an assessee referred to in clause (aa) is—

(i) a company; or

(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or

(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,

the 30th day of September of the assessment year;

Now, let us also see what section 44AB as applicable to A.Y. 2016-17 says (emphasis supplied):

44AB. Every person,—

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or

(b) carrying on profession shall, if his gross receipts in profession exceed twenty-five lakh rupees in any previous year; or

(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BBor section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or

(d) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44ADand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in anyprevious year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

It would also be relevant to see what the Explanation to this section says:

Explanation.—For the purposes of this section,—

(ii) "specified date", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139.

Therefore, section 139(1) lays down the time limit for furnishing the income-tax return and for all companies and for all non companies who have to either get a tax audit done or any audit done under any other law, the due date for filing the return for A.Y. 2016-17 in the normal course is 30th September, 2016.

The due date for getting the accounts audited by an accountant u/s 44ABmeans the due date for furnishing the return of income under sub-section (1) of section 139. Thus, the due date for tax audit is linked to the date specified in section 139(1). If there is a change in that date, then automatically, the due date for the tax audit also gets changed.

Therefore, to me, it appears that all the controversies that are being discussed in the country today by Chartered Accountants are uncalled for. The question that then arises is – why is there a controversy?

The controversy appears to have arisen because after the Notification was issued, the Ministry of Finance sent out a tweet on Twitter as under:

“Due date for filing of income tax returns by tax payers whose accounts are required to be audited under IT Act has been extended to 17th Oct”

The other culprit responsible for this controversy is the Press Release that was released by the CBDT spokesperson on the evening of 9th September. That too refers to the tax audit cases.

This has, proverbially, set the cat amongst the pigeons.

However, my personal view is that a tweet or a press release cannot over ride or change the law or a notification that is issued officially. What we must read is only the Notification issued on 9th September. That Notification very clearly refers to all tax payers for whom the due date for filing the returns was 30th September, 2016. In fact, the last sentence in the said Notification makes it amply clear that the Notification seeks to cover all tax payers for whom the due date is 30th September and not merely those who are subject to tax audit. Ultimately, it is the Notification that is issued pursuant to the powers vested in the CBDT u/s. 119 of the Act that matters. I may therefore reiterate here that it is not only the tax auditees and companies for whom the due date for filing the returns has been extended from 30th September, 2016 to 17th October, 2016 but all the other assessees also who are covered by any other law (other than Companies Act and Income-tax Act) and who have to, under that other law, get their accounts audited – for e.g. certain LLPs under the LLP Act.

Having spent some time in writing this article, I am now resuming my work of reviewing tax audits and tax returns as I have no intention of taking “advantage(?)” of the extension. In principal, I have always been a strong opponent of extensions.

The unthinkable has happened! The CBDT has issued a notification on 9th September in exercise of the powers vested in it under section 119 of the Income-tax Act, 1961 (the Act) extending the due date for filing of returns u/s. 139(1) of the Act from 30th September, 2016 to 17th October, 2016.

This is the first time that an extension of time has been notified by the CBDT without any CA or a body of CAs actually asking for the same. Secondly, it has come well in advance instead of being notified at the last moment. There have been no writs filed by anyone in any court of law seeking a forcible extension of time.

By itself, an extension of this type should not create a controversy. But, many people thrive on creating controversies by reading in between the lines, by reading into the lines and by interpreting and misinterpreting words and punctuations and what not. Therefore, there is a raging debate already going on in various quarters about the applicability of the Notification.

First of all, let us see what the notification states. The relevant part of the Notification (F. No. 225/195/2016-ITA-II) is reproduced below (emphasis supplied):

“in exertcise of the powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the `due date’ for furnishing such returns of Income from 30th September, 2016 to 17th October, 2016, in case of tax payers throughout India, who are liable to furnish their Income-tax Return by the said `due-date’.”

The reason given in the Notification for extending the due date is that the last date for making declarations under the Income Declaration Scheme 2016 is 30th September, 2016 and this date coincides with the last date for filing Income-tax returns for A.Y. 2016-17 in case of certain categories of tax payers and this is likely to cause inconvenience to the tax payers. Therefore, with a view to remove the inconvenience as well as “to facilitate ease of compliance”, the due date has been extended.

We are all aware that the Income Declaration Scheme 2016 is being marketed heavily by the Finance Ministry. Even the Prime Minister referred to it in one of his “Mann ki Baat” aired on the radio. Hundreds of meetings have been convened by various officers of the income-tax department as well as the chairperson of the CBDT with the objective of exhorting tax payers to come clean under this Scheme. The Finance Minister is also doing his bit in this regard.

It is therefore understandable that the government does not want to take chances in this matter and hence the due date for filing of returns has been extended.

But, as mentioned earlier, this extension was totally unexpected and unwanted by most Chartered Accountants. Since there has not been any change in the forms for the tax audits, it was virtually a foregone conclusion that this year, there would be no extension. So, the latest Notification has come as a surprise to most of us.

...

The real reason for writing this article is to deal with the unnecessary controversy as to the scope of the extension. There is animated discussion in several “Whatsapp” groups as well as in other forums, as to whether the due date for tax audits has been extended or not. Some people are also questioning whether the extension covers only those cases where tax audit was applicable and whether those cases where tax audit is not applicable but, because of some other audit, the due date for filing of returns was 30th September are also covered by the extension.

At the outset, I must confess that on a first reading of the Notification, I too was slightly confused about the scope. However, upon a close reading of section 139(1) and section 44AB, all doubts have been cleared. To my mind, the Notification of the extension is quite clearly drafted. All tax payers for whom the due date was 30th September, 2016 are covered by the Notification and therefore, in all such cases, the last date for filing the return of income for A.Y. 2016-17 would now be 17th October, 2016.

First of all, let us see what section 139(1) says. The Explanation 2 to sub section (1) is reproduced below (emphasis supplied):

Explanation 2.—In this sub-section, "due date" means,—

(a) where the assessee other than an assessee referred to in clause (aa) is—

(i) a company; or

(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or

(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,

the 30th day of September of the assessment year;

Now, let us also see what section 44AB as applicable to A.Y. 2016-17 says (emphasis supplied):

44AB. Every person,—

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or

(b) carrying on profession shall, if his gross receipts in profession exceed twenty-five lakh rupees in any previous year; or

(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BBor section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or

(d) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44ADand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in anyprevious year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

It would also be relevant to see what the Explanation to this section says:

Explanation.

...

—For the purposes of this section,—

(ii) "specified date", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139.

Therefore, section 139(1) lays down the time limit for furnishing the income-tax return and for all companies and for all non companies who have to either get a tax audit done or any audit done under any other law, the due date for filing the return for A.Y. 2016-17 in the normal course is 30th September, 2016.

The due date for getting the accounts audited by an accountant u/s 44ABmeans the due date for furnishing the return of income under sub-section (1) of section 139. Thus, the due date for tax audit is linked to the date specified in section 139(1). If there is a change in that date, then automatically, the due date for the tax audit also gets changed.

Therefore, to me, it appears that all the controversies that are being discussed in the country today by Chartered Accountants are uncalled for. The question that then arises is – why is there a controversy?

The controversy appears to have arisen because after the Notification was issued, the Ministry of Finance sent out a tweet on Twitter as under:

“Due date for filing of income tax returns by tax payers whose accounts are required to be audited under IT Act has been extended to 17th Oct”

The other culprit responsible for this controversy is the Press Release that was released by the CBDT spokesperson on the evening of 9th September. That too refers to the tax audit cases.

This has, proverbially, set the cat amongst the pigeons.

However, my personal view is that a tweet or a press release cannot over ride or change the law or a notification that is issued officially. What we must read is only the Notification issued on 9th September. That Notification very clearly refers to all tax payers for whom the due date for filing the returns was 30th September, 2016. In fact, the last sentence in the said Notification makes it amply clear that the Notification seeks to cover all tax payers for whom the due date is 30th September and not merely those who are subject to tax audit. Ultimately, it is the Notification that is issued pursuant to the powers vested in the CBDT u/s. 119 of the Act that matters. I may therefore reiterate here that it is not only the tax auditees and companies for whom the due date for filing the returns has been extended from 30th September, 2016 to 17th October, 2016 but all the other assessees also who are covered by any other law (other than Companies Act and
Income-tax Act) and who have to, under that other law, get their accounts audited – for e.g. certain LLPs under the LLP Act.

...

Having spent some time in writing this article, I am now resuming my work of reviewing tax audits and tax returns as I have no intention of taking “advantage(?)” of the extension. In principal, I have always been a strong opponent of extensions.